According to the latest monthly business survey from the National Australia Bank, the pace of economic activity improved in September, setting up what could be an improving end to the year.
The improvement last month seems to have provided a late spurt to what looked like earlier on to be a tough quarter.
The NAB said that both business conditions and confidence picked up in the month, though the latter remained negative, while the former improved to its long-term average from a weak set of numbers in August.
NAB Head of Australian Economics Gareth Spence said in Tuesday’s release that “Some of last month’s fall in confidence was reversed in September but confidence remains well below average.”
Business confidence remains below average and in negative territory at -2 index points.
“Confidence remains weakest in the goods distribution industries – retail and wholesale – though we did see an improvement in retail alongside recreation & personal services in the month.”
Spence said the "rebound in conditions in the month was driven by manufacturing, recreation & personal services, retail and wholesale.”
“Interestingly, as we think we are passing through the weakest point in economic growth for this cycle, business conditions have broadly tracked around average through mid-2024.”
Business conditions are now back around average at +7 index points – with all three subcomponents rising in the month.
The NAB said its survey showed "all three subcomponents of business conditions picked up in the month, with the employment index now back above average.”
"Despite the easing trend in conditions over the past 24 months and very weak forward orders through 2024, capacity utilisation continues to track well above average and reported capex also remains healthy, suggesting that despite the economy tracking through a period of slow growth, the level of activity has remained somewhat resilient.
"Encouragingly, price pressures also continue to abate with both survey-wide and retail sector price growth continuing to trend lower in the month.
"However, input cost growth remains higher than output price growth, suggesting that business margins are being pressured,” the NAB said.
But the NAB sees reasons in the report to be more confident about the outlook for the economy than in August.
“Overall, the business survey points to some encouraging signs as the RBA attempts to come in for a soft landing.
"While we would like to see the easing in price growth maintained over coming months, and for conditions to hold up even if just at around average levels, for now the trends remain encouraging”.
